The traditional 60/40 portfolio is under scrutiny. Today, some investing professionals are advocating for a 40/30/30 allocation, consisting of 40% stocks, 30% bonds and 30% alternatives.
The shift in thinking stems from what happened in 2022. Rising inflation and aggressive interest rate hikes created a rare environment where both stocks and bonds declined at the same time.
According to Morningstar, this was the only market downturn in roughly 150 years where a 60/40 portfolio experienced a deeper drawdown than an all-equity portfolio. The recovery period was also longer, meaning balanced investors faced both larger losses and a slower rebound.
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That experience has supported the case for adding alternatives, which are assets outside of stocks, bonds and cash. Commodities such as gold and silver are common examples, but the category also includes hedge fund-style strategies that aim for absolute returns.
“Alternatives have become increasingly relevant in today’s market environment, which has been marked by sharp swings in growth expectations, inflation narratives, policy uncertainty, elevated equity concentration and geopolitical risk,” says Matthew Bartolini, managing director and global head of research strategists at State Street Investment Management.
These strategies are designed to generate positive returns regardless of market direction and to have low correlation with traditional assets, meaning they may behave differently when stocks or bonds decline.
“Traditional diversifiers are failing again; stocks and bonds are dropping while gold is behaving like a risk asset,” says Jerry Prior III, chief investment officer of managed futures strategies, chief operating officer and managing partner at Mount Lucas Management LP. “The Iran war has changed the calculus entirely.”
Historically, access to alternatives has been limited. Many strategies required investors to meet accredited investor thresholds or commit large minimum investments.
Fees were also high, often following the “2 and 20” model, which charges 2% of assets annually plus 20% of profits above a benchmark. These performance fees are typically subject to a high-water mark, meaning managers only earn incentive fees after recovering prior losses.
More recently, asset managers have introduced alternative exchange-traded funds (ETFs) that aim to make these strategies more accessible. These funds trade on exchanges like stocks, typically charge a flat expense ratio and can offer improved tax efficiency compared with traditional hedge fund structures.
However, the space remains complex. Many of these ETFs are actively managed and rely on proprietary models or portfolio manager discretion, making them less transparent than traditional index funds.
Here are nine ETFs to invest in alternative assets in 2026:
| ETF | Expense ratio |
| State Street Bridgewater All Weather ETF (ticker: ALLW) | 0.85% |
| KraneShares Mount Lucas Managed Futures Index Strategy ETF (KMLM) | 0.90% |
| Simplify Managed Futures Strategy ETF (CTA) | 0.75% |
| Unlimited HFND Multi-Strategy Return Tracker ETF (HFND) | 1.07% |
| iMGP DBi Managed Futures Strategy ETF (DBMF) | 0.85% |
| Simplify Hedged Equity ETF (HEQT) | 0.43% |
| Fidelity Hedged Equity ETF (FHEQ) | 0.48% |
| Aberdeen Physical Precious Metals Basket Shares ETF (GLTR) | 0.60% |
| VanEck BDC Income ETF (BIZD) | 12.89%* |
*Includes 12.44% in acquired fund fees and expenses.
State Street Bridgewater All Weather ETF (ALLW)
“ALLW is an actively managed, multi-asset ETF that brings Bridgewater’s All Weather framework into an ETF structure,” Bartolini says. “The strategy is designed to help investors diversify portfolios by improving balance and resilience across different economic environments — rising growth, falling growth, rising inflation and falling inflation — rather than relying on a single macro-outcome.”
ALLW uses a strategy called risk parity. “Instead of depending on forecasts or traditional correlations, ALLW allocates across global equities, nominal government bonds, inflation-linked bonds, commodities and gold, balancing risk based on each asset’s sensitivity to growth and inflation,” Bartolini explains. The ETF is also internally leveraged via futures and swaps. ALLW charges a 0.85% expense ratio.
KraneShares Mount Lucas Managed Futures Index Strategy ETF (KMLM)
“The closure of the Strait of Hormuz has triggered the largest supply disruption in the history of the global oil market, and energy futures markets are doing exactly what they’re designed to do,” Prior says. “When volatility and cross-asset dislocations of this magnitude hit, an alternative strategy that can go long or short across commodities, currencies and rates can provide genuine diversification.”
In partnership with Mount Lucas, KraneShares offers KMLM, which is benchmarked to the KFA MLM Index. This index tracks 22 liquid futures contracts across 11 commodities, six currencies and five global bond markets. These exposures are weighted based on historical volatility, and the ETF charges a 0.9% expense ratio. As of April 6, KMLM is up 9.4% year to date on a net asset value (NAV) basis.
Simplify Managed Futures Strategy ETF (CTA)
KMLM is an example of an index-based alternative strategy with a long-established benchmark. Investors who prefer a more flexible, active approach may consider CTA. The ETF is offered by Simplify in partnership with Altis Partners, which developed the quantitative models used to manage the portfolio. It also comes at a lower cost, with a 0.75% expense ratio compared with 0.9% for KMLM.
The bulk of CTA’s portfolio is held in a Simplify money market ETF, which serves as collateral for a range of futures positions. These positions are primarily in commodities but can also include currencies and global bonds. The strategy can go both long and short across these markets in an effort to generate positive, uncorrelated returns. As of April 6, CTA is up 15.4% year to date on a NAV basis.
Unlimited HFND Multi-Strategy Return Tracker ETF (HFND)
Active alternative funds have manager-specific risk. This means outcomes can vary based on how a manager implements and adjusts the strategy over time. That can show up as model risk, where the assumptions and inputs behind a strategy change, or style drift, where managers gradually move away from the fund’s original objectives. HFND seeks to reduce this type of risk.
HFND uses a replication-based approach. It analyzes publicly available return and fee data across the hedge fund industry and reverse-engineers a portfolio designed to deliver similar return, volatility and correlation characteristics, but without the typical fee structure. The strategy is implemented through a mix of ETFs and futures contracts. As of April 6, HFND is up 4% year to date on a NAV basis.
iMGP DBi Managed Futures Strategy ETF (DBMF)
HFND is not the only replication-based alternative ETF. Another widely used option is DBMF, which seeks to replicate the gross-of-fee performance of the SG CTA Index, a benchmark of managed futures hedge funds. Unlike the funds included in that index, DBMF does not charge traditional hedge fund fees, which helps preserve more of the strategy’s returns. It charges a 0.85% expense ratio.
At the core of DBMF is a quantitative model that decomposes the returns of the SG CTA Index and reverse engineers a portfolio to match its characteristics. The resulting exposures can include both long and short positions across equity futures, fixed income, currencies and commodities. DBMF is one of the more established alternative ETFs, with about $1.5 billion in assets under management.
[Read: 10 Stocks That Hedge Funds and ETFs are Buying Right Now]
Simplify Hedged Equity ETF (HEQT)
The 60/40 portfolio struggled in 2022 because bonds became more correlated with stocks, meaning both asset classes declined at the same time. Some alternative ETFs aim to address this by introducing a third, uncorrelated asset, but others take a different approach by directly hedging equity risk using derivatives such as options. HEQT is one example, offering this type of strategy at a 0.43% expense ratio.
HEQT allocates most of its portfolio to iShares Core S&P 500 ETF (IVV) for core equity exposure. A smaller portion is dedicated to a put spread collar. This involves buying a 5% out-of-the-money put, selling a 20% out-of-the-money put and selling a covered call. HEQT ladders these collars across three sequential monthly maturities. The structure provides downside protection while giving up upside potential.
Fidelity Hedged Equity ETF (FHEQ)
A put spread collar like the one used in HEQT provides defined downside protection within a range but leaves investors exposed beyond the lower strike and caps upside due to the covered call. It tends to work well in modest drawdowns or sideways markets, but it is more vulnerable in sharp sell-offs, where losses can exceed the protection band. To address that scenario, FHEQ uses a different structure.
FHEQ allocates most of its portfolio to an actively selected basket of large-cap U.S. stocks designed to resemble the S&P 500, with selections based on quantitative analysis of valuation, growth and profitability. It complements this with a laddered series of S&P 500 put options rather than a spread. This means less protection in gradual declines but a potentially stronger payoff in sharp downturns.
Aberdeen Physical Precious Metals Basket Shares ETF (GLTR)
Investors who prefer to avoid the complexity of futures-based strategies can take a more traditional approach through a physically backed ETF like GLTR. Rather than using derivatives, ownership of GLTR corresponds to allocated holdings of gold, silver, platinum and palladium held in audited custody. The fund charges a 0.60% expense ratio and has about $2.9 billion in assets under management.
Holding a basket of metals can provide more diversified exposure than any single commodity, as each has different demand drivers. Gold is influenced by central bank reserves and its role as a store of value. Silver has both monetary and industrial uses, particularly in electronics and solar panels. Platinum and palladium are primarily industrial metals, with demand tied to automotive and manufacturing activity.
VanEck BDC Income ETF (BIZD)
“BIZD provides broad exposure to publicly traded U.S. business development companies (BDCs), offering a liquid and transparent way to access private credit markets,” says Coulter Regal, product manager at VanEck. “It tracks a rules-based index of publicly listed BDCs, which primarily invest in senior secured, floating-rate loans to middle-market companies.” The ETF pays a high 9.4% 30-day SEC yield.
“Many listed BDCs are now trading at discounts to net asset value not often seen in recent years, presenting a potential entry point for income-oriented investors,” Regal explains. “At the same time, redemption constraints at several non-traded private credit funds have highlighted the practical advantages of BDCs that offer daily liquidity and real-time price transparency.”
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9 ETFs for Solid Alternative Assets originally appeared on usnews.com
Update 04/07/26: This story was previously published at an earlier date and has been updated with new information.